Releases

ARLINGTON, Va.--(BUSINESS WIRE)--Aug. 3, 2016--
Graham Holdings Company (NYSE: GHC) today reported income from
continuing operations attributable to common shares of $60.8 million
($10.76 per share) for the second quarter of 2016, compared to $39.3
million ($6.71 per share) for the second quarter of 2015. Net income
attributable to common shares was $57.8 million ($9.87 per share) for
the second quarter of 2015, including $18.5 million ($3.16 per share) in
income from discontinued operations. (Refer to “Discontinued Operations”
discussion below.)

The results for the second quarter of 2016 and 2015 were affected by a
number of items as described in the following paragraphs. Excluding
these items, income from continuing operations attributable to common
shares was $45.0 million ($7.97 per share) for the second quarter of
2016, compared to $47.1 million ($8.04 per share) for the second quarter
of 2015. (Refer to the Non-GAAP Financial Information schedule at the
end of this release for additional details.)

Items included in the Company’s income from continuing operations for
the second quarter of 2016:

a $38.6 million non-operating gain from the sales of land and
marketable equity securities (after-tax impact of $23.9 million, or
$4.23 per share);

a $3.2 million non-operating gain arising from the formation of a
joint venture (after-tax impact of $1.7 million, or $0.29 per share);

$24.1 million in non-operating unrealized foreign currency losses
(after-tax impact of $15.4 million, or $2.73 per share); and

a favorable $5.6 million out of period deferred tax adjustment related
to the Kaplan Higher Education (KHE) goodwill impairment recorded in
the third quarter of 2015 ($1.00 per share).

Items included in the Company’s loss from continuing operations for the
second quarter of 2015:

$16.6 million in restructuring charges and accelerated depreciation at
the education division (after-tax impact of $10.7 million, or $1.82
per share);

a $6.9 million long-lived asset impairment charge at the education
division (after-tax impact of $4.4 million, or $0.75 per share);

$7.7 million in non-operating gains arising from the sales of three
businesses and an investment (after tax impact of $5.0 million, or
$0.85 share); and

Revenue for the second quarter of 2016 was $628.9 million, down 8% from
$680.9 million in the second quarter of 2015. Revenues declined at the
education division, offset by an increase at the television broadcasting
division and in other businesses. The Company reported operating income
of $74.1 million for the second quarter of 2016, compared to $56.2
million for the second quarter of 2015. Operating results improved at
the education and television broadcasting divisions, offset by a decline
in other businesses.

For the first six months of 2016, the company reported income from
continuing operations attributable to common shares of $98.5 million
($17.33 per share), compared to $36.6 million ($6.22 per share) for the
first six months of 2015. Net income attributable to common shares was
$78.4 million ($13.40 per share) for the first six months of 2015,
including $41.8 million ($7.18 per share) in income from discontinued
operations. (Refer to “Discontinued Operations” discussion below.)

The results for the first six months of 2016 and 2015 were affected by a
number of items as described in the following paragraphs. Excluding
these items, income from continuing operations attributable to common
shares was $73.2 million ($12.87 per share) for the first six months of
2016, compared to $52.2 million ($8.97 per share) for the first six
months of 2015. (Refer to the Non-GAAP Financial Information schedule at
the end of this release for additional details.)

Items included in the Company’s income from continuing operations for
the first six months of 2016:

a $40.3 million non-operating gain from the sales of land and
marketable equity securities (after-tax impact of $25.0 million, or
$4.42 per share);

a $22.2 million non-operating gain arising from the sale of a business
and the formation of a joint venture (after-tax impact of $13.6
million, or $2.37 per share);

$29.5 million in non-operating unrealized foreign currency losses
(after-tax impact of $18.9 million, or $3.33 per share); and

a favorable $5.6 million out of period deferred tax adjustment related
to the KHE goodwill impairment recorded in the third quarter of 2015
($1.00 per share).

Items included in the Company’s income from continuing operations for
the first six months of 2015:

$27.3 million in restructuring charges and accelerated depreciation at
the education division (after-tax impact of $17.5 million, or $2.99
per share);

a $6.9 million long-lived asset impairment charge at the education
division (after-tax impact of $4.4 million, or $0.75 per share);

$13.7 million in non-operating gains arising from the sales of three
businesses and an investment, and on the formation of a joint venture
(after tax impact of $8.4 million, or $1.35 per share); and

Revenue for the first six months of 2016 was $1,230.7 million, down 7%
from $1,328.3 million in the first six months of 2015. Revenues declined
at the education division, offset by an increase at the television
broadcasting division and in other businesses. The Company reported
operating income of $126.0 million for the first six months of 2016,
compared to $65.1 million for the first six months of 2015. Operating
results improved at the education and television broadcasting divisions,
offset by a decline in other businesses.

Division Results

Education

Education division revenue totaled $419.2 million for the second quarter
of 2016, down 20% from revenue of $523.6 million for the same period of
2015. Kaplan reported operating income of $32.9 million for the second
quarter of 2016, compared to $15.8 million for the second quarter of
2015. Operating results for the second quarter of 2015 included
restructuring costs of $16.6 million and a $6.9 million long-lived asset
impairment charge.

For the first six months of 2016, education division revenue totaled
$820.3 million, down 20% from revenue of $1,024.2 million for the same
period of 2015. Kaplan reported operating income of $47.4 million for
the first six months of 2016, compared to an operating loss of $7.0
million for the first six months of 2015. Operating results for the
first six months of 2015 included restructuring costs of $27.3 million
and a $6.9 million long-lived asset impairment charge.

A summary of Kaplan’s operating results for the second quarter of
2016 compared to 2015 is as follows:

Three Months Ended

Six Months Ended

June 30

June 30

(in thousands)

2016

2015

% Change

2016

2015

% Change

Revenue

Higher education

$

157,980

$

240,717

(34

)

$

323,529

$

478,285

(32

)

Test preparation

79,349

80,381

(1

)

145,811

149,607

(3

)

Kaplan international

182,325

200,703

(9

)

351,612

392,784

(10

)

Kaplan corporate and other

18

1,959

(99

)

143

3,818

(96

)

Intersegment elimination

(459

)

(135

)

—

(806

)

(267

)

—

$

419,213

$

523,625

(20

)

$

820,289

$

1,024,227

(20

)

Operating Income (Loss)

Higher education

$

17,237

$

24,764

(30

)

$

38,543

$

25,357

52

Test preparation

7,036

7,079

(1

)

4,726

2,745

72

Kaplan international

16,479

17,573

(6

)

21,376

25,290

(15

)

Kaplan corporate and other

(6,107

)

(25,251

)

76

(13,831

)

(50,601

)

73

Amortization of intangible assets

(1,704

)

(1,467

)

(16

)

(3,385

)

(2,974

)

(14

)

Impairment of long-lived assets

—

(6,876

)

—

—

(6,876

)

—

Intersegment elimination

(49

)

26

—

(49

)

58

—

$

32,892

$

15,848

—

$

47,380

$

(7,001

)

—

Kaplan Higher Education (KHE) includes Kaplan’s domestic postsecondary
education businesses, made up of fixed-facility colleges and online
postsecondary and career programs. KHE also includes the domestic
professional and other continuing education businesses.

Since 2012, KHE has closed campuses, consolidated facilities and reduced
its workforce. On September 3, 2015, Kaplan completed the sale of
substantially all of the remaining assets of its KHE Campuses business.
In connection with these and other plans, KHE incurred $2.5 million and
$5.4 million in restructuring costs in the second quarter and first six
months of 2015, respectively. For the second quarter of 2015, these
costs included severance ($1.0 million), lease obligation losses ($0.9
million) and accelerated depreciation ($0.6 million). For the six months
of 2015, these costs included severance ($2.2 million), lease obligation
losses ($1.8 million), accelerated depreciation ($1.3 million) and other
items ($0.1 million).

In the second quarter of 2015, Kaplan recorded a $6.9 million long-lived
asset impairment charge in connection with the KHE Campuses business.
KHE results, excluding the impairment charge, include revenue and
operating losses (including restructuring charges) related to all KHE
Campuses, those sold or closed, including Mount Washington College and
Bauder College, as follows:

Three Months Ended

Six Months Ended

June 30

June 30

(in thousands)

2016

2015

2016

2015

Revenue

$

266

$

66,152

$

1,064

$

131,459

Operating loss

$

(907

)

$

(6,776

)

$

(2,099

)

$

(19,063

)

In the second quarter and first six months of 2016, KHE revenue declined
34% and 32%, respectively, due to campus sales and closings, and
declines in average enrollments at Kaplan University. KHE operating
results declined in the second quarter of 2016 due primarily to lower
enrollment at Kaplan University, offset by reduced losses at the KHE
Campuses business. KHE operating results improved in the first six
months of 2016 due to reduced losses at the KHE Campuses business and
lower marketing expenditures at Kaplan University.

New higher education student enrollments at Kaplan University declined
25% in the second quarter of 2016 and 31% for the first six months of
2016 due to lower demand across Kaplan University programs. Total
students at Kaplan University were 33,367 at June 30, 2016, down 19%
from June 30, 2015.

Kaplan University enrollments at June 30, 2016 and 2015, by degree and
certificate programs, are as follows:

As of June 30

2016

2015

Certificate

6.6

%

2.9

%

Associate’s

20.4

%

28.0

%

Bachelor’s

50.4

%

46.8

%

Master’s

22.6

%

22.3

%

100.0

%

100.0

%

Kaplan Test Preparation (KTP) includes Kaplan’s standardized test
preparation programs. KTP revenue declined 1% and 3% for the second
quarter and first six months of 2016, respectively. Enrollments,
excluding the new economy skills training offerings, were down 10% for
the first six months of 2016 due primarily to declines in pre-college
programs; however, unit prices were generally higher. In comparison to
2015, KTP operating results were down 1% in the second quarter of 2016,
but improved for the first six months of 2016. KTP's results reflect a
reduction in operating expenses, despite increased investment in new
economy skills training programs.

Kaplan International includes English-language programs, and
postsecondary education and professional training businesses largely
outside the United States. In January and February 2016, Kaplan acquired
Mander Portman Woodward, a leading provider of high-quality, bespoke
education to UK and international students in London, Cambridge and
Birmingham; and Osborne Books, an education publisher of learning
resources for accounting qualifications in the UK.

Kaplan International revenue declined 9% and 10% for the second quarter
and first six months of 2016, of which 3% was due to currency
fluctuations. The remaining decrease is due to enrollment declines in
English-language and UK Pathways programs, partially offset by
enrollment growth in Singapore and Australia higher education programs.
Revenue growth from the 2016 acquisitions was largely offset by revenue
declines due to prior year dispositions. Operating income declined in
the second quarter and first six months of 2016, due largely to the
declines in English-language and Pathways results, partially offset by
operating income from newly acquired businesses.

Kaplan corporate and other represents unallocated expenses of Kaplan,
Inc.’s corporate office, other minor businesses and certain shared
activities. In the second quarter of 2015, Kaplan corporate recorded
$13.6 million in restructuring charges, including accelerated
depreciation ($9.7 million) and lease obligation losses ($3.8 million),
related to office space managed by Kaplan corporate. In the first six
months of 2015, Kaplan corporate recorded $21.2 million in restructuring
charges, including accelerated depreciation ($16.2 million) and lease
obligation losses ($4.9 million) related to office space managed by
Kaplan corporate. In 2016, Kaplan corporate expenses also declined due
to the benefits from restructuring activities. Also, 2015 spending for
the replacement of its human resources system was not repeated in 2016.

In the first quarter of 2016, Kaplan sold Colloquy, which was a part of
Kaplan corporate and other, for a gain of $18.9 million that is included
in other non-operating income. In the second quarter of 2015, Kaplan
sold two small businesses; one was part of KHE and the other was part of
Kaplan International. The gains on these dispositions are included in
other non-operating income in the second quarter of 2015.

Television Broadcasting

Revenue at the television broadcasting division increased 6% to $96.5
million in the second quarter of 2016, from $90.8 million in the same
period of 2015; operating income for the second quarter of 2016
increased 5% to $44.2 million, from $42.0 million in the same period of
2015. The revenue increase is due primarily to $5.3 million more in
retransmission revenues. The increase in operating income is due to the
revenue increase, offset by higher spending on digital initiatives and
increased network fees.

Revenue at the television broadcasting division increased 8% to $188.5
million in the first six months of 2016, from $174.3 million in the same
period of 2015; operating income for the first six months of 2016
increased 6% to $85.4 million, from $80.6 million in the same period of
2015. The revenue increase is due primarily to $10.1 million more in
retransmission revenues and a $2.7 million increase in political
advertising revenue. The increase in operating income is due to the
revenue increase, offset by higher spending on digital initiatives and
increased network fees.

In May 2016, the Company announced that it had reached an agreement with
Nexstar Broadcasting Group, Inc. and Media General, Inc. to acquire
WCWJ, a CW affiliate television station in Jacksonville, FL and WSLS, an
NBC affiliate television station in Roanoke, VA for $60 million in cash
and the assumption of certain pension obligations. The Company will
continue to operate both stations under their current network
affiliations. The acquisition is subject to approval by the FCC, other
regulatory approvals, and the satisfaction of closing conditions.

Other Businesses

Other businesses is comprised of three manufacturing businesses,
including Dekko, a manufacturer of electrical workspace solutions,
architectural lighting, and electrical components and assemblies
acquired in November 2015; and providers of home health and hospice
services. Other businesses also include SocialCode, a provider of
marketing solutions on social-media platforms; Slate and Foreign Policy,
which publish online and print magazines and websites; and certain other
new ventures.

The increase in revenues for the second quarter and first six months of
2016 is mostly due to the Dekko acquisition. In the second quarter and
first six months of 2016, positive operating results from the
manufacturing and healthcare businesses were offset by intangibles
amortization and losses from publishing, SocialCode and new ventures.

In June 2016, the Company acquired the outstanding 20% redeemable
noncontrolling interest in Residential Healthcare (Residential). Also in
June 2016, Celtic Healthcare (Celtic) and Residential combined their
business operations and the Company now owns 90% of the combined entity.
The Company incurred approximately $2.0 million in expenses in
conjunction with these transactions in the second quarter of 2016.

In June 2016, Residential and a Michigan hospital formed a joint venture
to provide home health services to West Michigan patients. Residential
manages the operations of the joint venture and holds a 40% interest.
The pro rata operating results of the joint venture are included in the
Company's equity in earnings of affiliates. In connection with this
transaction, the Company recorded a pre-tax gain of $3.2 million in the
second quarter of 2016 that is included in other non-operating income.

In January 2015, Celtic Healthcare and Allegheny Health Network formed a
joint venture to combine each other’s home health and hospice assets in
the western Pennsylvania region. Celtic manages the operations of the
joint venture for a fee and holds a 40% interest. The pro rata operating
results of the joint venture are included in the Company’s equity in
earnings of affiliates. In connection with this transaction, the Company
recorded a noncash pre-tax gain of $6.0 million in the first quarter of
2015 that is included in other non-operating income.

In the second quarter of 2015, the Company sold The Root, an online
magazine; the related gain on disposition is included in other
non-operating income.

Corporate Office

Corporate office includes the expenses of the Company’s corporate
office, the pension credit for the Company’s traditional defined benefit
plan and certain continuing obligations related to prior business
dispositions. The total pension credit for the Company’s traditional
defined benefit plan was $32.1 million and $34.1 million in the first
six months of 2016 and 2015, respectively.

Without the pension credit, corporate office expenses declined in the
first six months of 2016 due primarily to lower compensation costs.

Equity in Earnings (Losses) of Affiliates

At June 30, 2016, the Company held interests in a number of home health
and hospice joint ventures, and interests in several other affiliates.
The Company recorded equity in losses of affiliates of $0.9 million for
the second quarter of 2016, compared to losses of $0.4 million for the
second quarter of 2015. The Company recorded equity in earnings of
affiliates of $0.1 million for the first six months of 2016, compared to
losses of $0.8 million for the first six months of 2015.

Other Non-Operating Income (Expense)

The Company recorded total other non-operating income, net, of $19.0
million for the second quarter of 2016, compared to $11.7 million for
the second quarter of 2015. The 2016 amounts included a $34.1 million
gain on the sale of land; a $4.5 million gain on the sale of marketable
equity securities; a $3.2 million gain on the Residential joint venture
transaction and other items, offset by $24.1 million in unrealized
foreign currency losses. The 2015 amounts included $7.7 million in gains
from the sales of businesses and an investment, $3.6 million in
unrealized foreign currency gains and other items.

The Company recorded total other non-operating income, net, of $34.1
million for the first six months of 2016, compared to $10.6 million for
the first six months of 2015. The 2016 amounts included a $34.1 million
gain on the sale of land; an $18.9 million gain on the sale of a
business; a $6.3 million gain on the sale of marketable equity
securities; a $3.2 million gain on the Residential joint venture
transaction and other items, offset by $29.5 million in unrealized
foreign currency losses. The 2015 amounts included a $6.0 million gain
on the Celtic joint venture transaction, $7.7 million in gains from the
sales of businesses and an investment, and other items, offset by $3.2
million in unrealized foreign currency losses.

Net Interest Expense and Related Balances

The Company incurred net interest expense of $7.3 million and $14.6
million for the second quarter and first six months of 2016,
respectively, compared to $8.0 million and $16.0 million for the second
quarter and first six months of 2015. At June 30, 2016, the Company had
$400.0 million in borrowings outstanding at an average interest rate of
7.2% and cash, marketable equity securities and other investments of
$999.8 million.

In July 2016, a Kaplan UK company entered into a 4-year loan agreement
for a £75 million borrowing. The overall effective interest rate is
2.01%, taking into account an interest rate swap agreement the Company
entered into on the same date as the borrowing.

Provision for Income Taxes

The Company's effective tax rate for the first six months of 2016 was
31.7%, compared with 34.8% for the first six months of 2015. In the
second quarter of 2016, the Company benefited from a favorable $5.6
million out of period deferred tax adjustment related to the KHE
goodwill impairment recorded in the third quarter of 2015. Excluding
this adjustment, the Company's effective tax rate for the first six
months of 2016 was 35.6%.

Discontinued Operations

In 2015, the Company completed the spin-off of Cable ONE as an
independent, publicly traded company and the sale of a school in China
that was previously part of Kaplan International.

As a result of these transactions, income from continuing operations
excludes the operating results and related loss, if any, on dispositions
of these businesses, which have been reclassified to discontinued
operations, net of tax, in 2015.

Earnings Per Share

The calculation of diluted earnings per share for the second quarter and
first six months of 2016 was based on 5,574,336 and 5,612,959 weighted
average shares outstanding, respectively, compared to 5,804,511 and
5,797,756 for the second quarter and first six months of 2015. At
June 30, 2016, there were 5,617,444 shares outstanding. On May 14, 2015,
the Board of Directors authorized the Company to acquire up to 500,000
shares of its Class B common stock; the Company has remaining
authorization for 267,528 shares as of June 30, 2016.

Forward-Looking Statements

This press release contains certain forward-looking statements that are
based largely on the Company’s current expectations. Forward-looking
statements are subject to certain risks and uncertainties that could
cause actual results and achievements to differ materially from those
expressed in the forward-looking statements. For more information about
these forward-looking statements and related risks, please refer to the
section titled “Forward-Looking Statements” in Part I of the Company’s
Annual Report on Form 10-K.

GRAHAM HOLDINGS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

June 30

%

(in thousands, except per share amounts)

2016

2015

Change

Operating revenues

$

628,933

$

680,890

(8

)

Operating expenses

532,470

587,533

(9

)

Depreciation of property, plant and equipment

16,045

25,609

(37

)

Amortization of intangible assets

6,278

4,647

35

Impairment of long-lived assets

—

6,876

—

Operating income

74,140

56,225

32

Equity in losses of affiliates, net

(891

)

(353

)

—

Interest income

721

323

—

Interest expense

(7,971

)

(8,348

)

(5

)

Other income, net

19,000

11,678

63

Income from continuing operations before income taxes

84,999

59,525

43

Provision for income taxes

23,800

19,600

21

Income from continuing operations

61,199

39,925

53

Income from discontinued operations, net of tax

—

18,502

—

Net income

61,199

58,427

5

Net income attributable to noncontrolling interests

(433

)

(434

)

—

Net income attributable to Graham Holdings Company

60,766

57,993

5

Redeemable preferred stock dividends

—

(211

)

—

Net Income Attributable to Graham Holdings Company Common
Stockholders

$

60,766

$

57,782

5

Amounts Attributable to Graham Holdings Company Common
Stockholders

Income from continuing operations

$

60,766

$

39,280

55

Income from discontinued operations, net of tax

—

18,502

—

Net income

$

60,766

$

57,782

5

Per Share Information Attributable to Graham Holdings Company
Common Stockholders

Basic income per common share from continuing operations

$

10.82

$

6.74

61

Basic income per common share from discontinued operations

—

3.18

—

Basic net income per common share

$

10.82

$

9.92

9

Basic average number of common shares outstanding

5,544

5,720

Diluted income per common share from continuing operations

$

10.76

$

6.71

60

Diluted income per common share from discontinued operations

—

3.16

—

Diluted net income per common share

$

10.76

$

9.87

9

Diluted average number of common shares outstanding

5,574

5,805

GRAHAM HOLDINGS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Six Months Ended

June 30

%

(in thousands, except per share amounts)

2016

2015

Change

Operating revenues

$

1,230,673

$

1,328,315

(7

)

Operating expenses

1,059,315

1,199,161

(12

)

Depreciation of property, plant and equipment

32,806

47,806

(31

)

Amortization of intangible assets

12,540

9,385

34

Impairment of long-lived assets

—

6,876

—

Operating income

126,012

65,087

94

Equity in earnings (losses) of affiliates, net

113

(757

)

—

Interest income

1,312

882

49

Interest expense

(15,919

)

(16,849

)

(6

)

Other income, net

34,096

10,573

—

Income from continuing operations before income taxes

145,614

58,936

—

Provision for income taxes

46,200

20,500

—

Income from continuing operations

99,414

38,436

—

Income from discontinued operations, net of tax

—

41,791

—

Net income

99,414

80,227

24

Net income attributable to noncontrolling interests

(868

)

(1,208

)

(28

)

Net income attributable to Graham Holdings Company

98,546

79,019

25

Redeemable preferred stock dividends

—

(631

)

—

Net Income Attributable to Graham Holdings Company Common
Stockholders

$

98,546

$

78,388

26

Amounts Attributable to Graham Holdings Company Common
Stockholders

Income from continuing operations

$

98,546

$

36,597

—

Income from discontinued operations, net of tax

—

41,791

—

Net income

$

98,546

$

78,388

26

Per Share Information Attributable to Graham Holdings Company
Common Stockholders

Basic income per common share from continuing operations

$

17.42

$

6.26

—

Basic income per common share from discontinued operations

—

7.21

—

Basic net income per common share

$

17.42

$

13.47

29

Basic average number of common shares outstanding

5,584

5,712

Diluted income per common share from continuing operations

$

17.33

$

6.22

—

Diluted income per common share from discontinued operations

—

7.18

—

Diluted net income per common share

$

17.33

$

13.40

29

Diluted average number of common shares outstanding

5,613

5,798

GRAHAM HOLDINGS COMPANY

BUSINESS SEGMENT INFORMATION

(Unaudited)

Three Months Ended

Six Months Ended

June 30

%

June 30

%

(in thousands)

2016

2015

Change

2016

2015

Change

Operating Revenues

Education

$

419,213

$

523,625

(20

)

$

820,289

$

1,024,227

(20

)

Television broadcasting

96,520

90,753

6

188,538

174,317

8

Other businesses

113,269

66,512

70

221,985

129,771

71

Corporate office

—

—

—

—

—

—

Intersegment elimination

(69

)

—

—

(139

)

—

—

$

628,933

$

680,890

(8

)

$

1,230,673

$

1,328,315

(7

)

Operating Expenses

Education

$

386,321

$

507,777

(24

)

$

772,909

$

1,031,228

(25

)

Television broadcasting

52,305

48,739

7

103,103

93,741

10

Other businesses

118,331

68,673

72

232,777

137,094

70

Corporate office

(2,095

)

(524

)

—

(3,989

)

1,165

—

Intersegment elimination

(69

)

—

—

(139

)

—

—

$

554,793

$

624,665

(11

)

$

1,104,661

$

1,263,228

(13

)

Operating Income (Loss)

Education

$

32,892

$

15,848

—

$

47,380

$

(7,001

)

—

Television broadcasting

44,215

42,014

5

85,435

80,576

6

Other businesses

(5,062

)

(2,161

)

—

(10,792

)

(7,323

)

(47

)

Corporate office

2,095

524

—

3,989

(1,165

)

—

$

74,140

$

56,225

32

$

126,012

$

65,087

94

Depreciation

Education

$

10,242

$

21,980

(53

)

$

21,345

$

40,508

(47

)

Television broadcasting

2,450

2,125

15

4,827

4,234

14

Other businesses

3,073

1,254

—

6,100

2,556

—

Corporate office

280

250

12

534

508

5

$

16,045

$

25,609

(37

)

$

32,806

$

47,806

(31

)

Amortization of Intangible Assets and Impairment of Long-Lived
Assets

Education

$

1,704

$

8,343

(80

)

$

3,385

$

9,850

(66

)

Television broadcasting

63

63

—

126

126

—

Other businesses

4,511

3,117

45

9,029

6,285

44

Corporate office

—

—

—

—

—

—

$

6,278

$

11,523

(46

)

$

12,540

$

16,261

(23

)

Pension Expense (Credit)

Education

$

3,018

$

3,947

(24

)

$

6,127

$

7,894

(22

)

Television broadcasting

418

391

7

857

782

10

Other businesses

306

186

65

560

379

48

Corporate office

(16,008

)

(16,939

)

(5

)

(31,869

)

(33,877

)

(6

)

$

(12,266

)

$

(12,415

)

(1

)

$

(24,325

)

$

(24,822

)

(2

)

GRAHAM HOLDINGS COMPANY

EDUCATION DIVISION INFORMATION

(Unaudited)

Three Months Ended

Six Months Ended

June 30

%

June 30

%

(in thousands)

2016

2015

Change

2016

2015

Change

Operating Revenues

Higher education

$

157,980

$

240,717

(34

)

$

323,529

$

478,285

(32

)

Test preparation

79,349

80,381

(1

)

145,811

149,607

(3

)

Kaplan international

182,325

200,703

(9

)

351,612

392,784

(10

)

Kaplan corporate and other

18

1,959

(99

)

143

3,818

(96

)

Intersegment elimination

(459

)

(135

)

—

(806

)

(267

)

—

$

419,213

$

523,625

(20

)

$

820,289

$

1,024,227

(20

)

Operating Expenses

Higher education

$

140,743

$

215,953

(35

)

$

284,986

$

452,928

(37

)

Test preparation

72,313

73,302

(1

)

141,085

146,862

(4

)

Kaplan international

165,846

183,130

(9

)

330,236

367,494

(10

)

Kaplan corporate and other

6,125

27,210

(77

)

13,974

54,419

(74

)

Amortization of intangible assets

1,704

1,467

16

3,385

2,974

14

Impairment of long-lived assets

—

6,876

—

—

6,876

—

Intersegment elimination

(410

)

(161

)

—

(757

)

(325

)

—

$

386,321

$

507,777

(24

)

$

772,909

$

1,031,228

(25

)

Operating Income (Loss)

Higher education

$

17,237

$

24,764

(30

)

$

38,543

$

25,357

52

Test preparation

7,036

7,079

(1

)

4,726

2,745

72

Kaplan international

16,479

17,573

(6

)

21,376

25,290

(15

)

Kaplan corporate and other

(6,107

)

(25,251

)

76

(13,831

)

(50,601

)

73

Amortization of intangible assets

(1,704

)

(1,467

)

(16

)

(3,385

)

(2,974

)

(14

)

Impairment of long-lived assets

—

(6,876

)

—

—

(6,876

)

—

Intersegment elimination

(49

)

26

—

(49

)

58

—

$

32,892

$

15,848

—

$

47,380

$

(7,001

)

—

Depreciation

Higher education

$

3,993

$

4,794

(17

)

$

8,168

$

9,622

(15

)

Test preparation

1,615

2,263

(29

)

3,396

5,153

(34

)

Kaplan international

4,319

5,073

(15

)

9,379

9,727

(4

)

Kaplan corporate and other

315

9,850

(97

)

402

16,006

(97

)

$

10,242

$

21,980

(53

)

$

21,345

$

40,508

(47

)

Pension Expense

Higher education

$

1,905

$

2,532

(25

)

$

3,810

$

5,064

(25

)

Test preparation

768

775

(1

)

1,536

1,550

(1

)

Kaplan international

67

106

(37

)

134

212

(37

)

Kaplan corporate and other

278

534

(48

)

647

1,068

(39

)

$

3,018

$

3,947

(24

)

$

6,127

$

7,894

(22

)

NON-GAAP FINANCIAL INFORMATION

GRAHAM HOLDINGS COMPANY

(Unaudited)

In addition to the results reported in accordance with accounting
principles generally accepted in the United States (GAAP) included in
this press release, the Company has provided information regarding
income from continuing operations, excluding certain items described
below, reconciled to the most directly comparable GAAP measures.
Management believes that these non-GAAP measures, when read in
conjunction with the Company’s GAAP financials, provide useful
information to investors by offering:

the ability to make meaningful period-to-period comparisons of the
Company’s ongoing results;

the ability to identify trends in the Company’s underlying business;
and

a better understanding of how management plans and measures the
Company’s underlying business.

Income from continuing operations, excluding certain items, should not
be considered substitutes or alternatives to computations calculated in
accordance with and required by GAAP. These non-GAAP financial measures
should be read only in conjunction with financial information presented
on a GAAP basis.

The following table reconciles the non-GAAP financial measures to the
most directly comparable GAAP measures:

Three Months Ended

Six Months Ended

June 30

June 30

(in thousands, except per share amounts)

2016

2015

2016

2015

Amounts attributable to Graham Holdings Company Common
Stockholders

Income from continuing operations, as reported

$

60,766

$

39,280

$

98,546

$

36,597

Adjustments:

Restructuring charges

—

10,656

—

17,497

Impairment of long-lived assets

—

4,400

—

4,400

Gain from the sales of land and marketable equity securities

(23,916

)

—

(25,004

)

—

Gain from the sales of businesses and an investment, and the
formation of joint ventures

(1,655

)

(4,957

)

(13,581

)

(8,367

)

Foreign currency loss (gain)

15,414

(2,309

)

18,897

2,060

Favorable out of period deferred tax adjustment

(5,631

)

—

(5,631

)

—

Income from continuing operations, adjusted (non-GAAP)

$

44,978

$

47,070

$

73,227

$

52,187

Per share information attributable to Graham Holdings Company
Common Stockholders

Diluted income per common share from continuing operations, as
reported

$

10.76

$

6.71

$

17.33

$

6.22

Adjustments:

Restructuring charges

—

1.82

—

2.99

Impairment of long-lived assets

—

0.75

—

0.75

Gain from the sales of land and marketable equity securities

(4.23

)

—

(4.42

)

—

Gain from the sales of businesses and an investment, and the
formation of joint ventures

(0.29

)

(0.85

)

(2.37

)

(1.35

)

Foreign currency loss (gain)

2.73

(0.39

)

3.33

0.36

Favorable out of period deferred tax adjustment

(1.00

)

—

(1.00

)

—

Diluted income per common share from continuing operations, adjusted
(non-GAAP)

$

7.97

$

8.04

$

12.87

$

8.97

The adjusted diluted per share amounts may not compute due to
rounding.